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Know the Risks and Costs to Demystify Supply Chain

Understanding the risks and costs in supply chain is easier said than done. Tim Greiner writes an article about how to deal with the vast multitude of variables that govern success and failure. As he notes, the reason why a seemingly simple objective like managing 10 key supply chain data points can become a challenge is because if your supply chain has 100 Tier 1 suppliers, those suppliers have suppliers of their own, and then those suppliers have suppliers, you are dealing with 10 million data points at the third tear. Since that sounds a bit unwieldy, a better way to begin is to assess your greatest costs and risks and prioritize solutions. After that, create indicator-based supplier surveys to track change, paying particular attention to provide context for data collected.

Supplier differentiation should emerge through survey question scoring to determine who are genuinely high performers and who are just doofuses. Creating leverage to drive change can be difficult with a small company, which is why Greiner suggests forming alliances within an industry with other businesses to push that change through. But to have any hope of achieving any of this, first you need to operationalize the work in the network:

A great supplier survey is useless if it isn’t owned and used by the people making a firm’s purchasing decisions. For sustainability initiatives to effectively spread from the sustainability team and into supply chain business relationships, the scoring system must be effectively integrated into the procurement process. Clear, measurable results will make it easier for non-sustainability practitioners to embrace the use of survey tools. Again, Walmart deserves the spotlight for its work to train its buyers to integrate survey results into their business processes and their conversations with suppliers.

Micromanagement is really not the most practical way to run a supply chain, and Greiner believes supply chains can achieve great success through more incremental measures. Use your brain to devise the tactics that will get you ahead.

About John Friscia

John Friscia is the Editor of Computer Aid's Accelerating IT Success. He began working for Computer Aid, Inc. in 2013 and continues to provide graphic design support for AITS. He graduated summa cum laude from Shippensburg University with a B.A. in English.

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